A-B-C-D Trade - page 26
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The EUR/USd Daily chart fib pull:
Retrace fibs:
High = April 14th high 1.2677
Low = June 7th low 1.1876
- pair bounced off of 61.8% retrace fib price area of 1.2989.
Fibo Fan = same high/low as above.
- pair bounced off of 78.6% diagonal fibo fan line.
- if movement goes above the 78.6%, move the high of fibo fan to next high (going back in time).
Extension
A = June 7th low 1.1876
B = June 20th high 1.2467
C = June 29th low 1.2151
FE 100 = 1.2762
FE 127 = 1.2926 (hit)
FE 161.8 = 1.3129
Resistance Watch:
200-day moving average
78.6% retrace fib price area of 1.3292 (or round number 1.3300).
FE 161.8 of 1.3139
During Asian session, the EUR/USD breakout occurred rather fast and one could not see the proper swings on the 5-min chart.
Attached is the 1-min chart, illustrating the use of this smaller time-frame, something not covered much in this thread.
A = 07:00 low 1.2875
B = 07:11 high 1.2917
C = 07:14 low 1.2911
Session high = 1.2920 during Asian and previous since opening of week.
FE 100 = 1.2953
FE 127 = 1.2964
FE 161.8 = 1.2979 (target*) hit
Entry:
If we flip back to the 5-min, after plotting the ABC, our rule of entry with opening of 5-min candle after breakout candle = 07:20 price @ 1.2931 + spread = 1.2934.
Stop-loss options:
- Just below Point C 1.2911 = risk of 24 pip
- Just below next 1-min pivot 1.2888 = risk of 47 pips
Risk/Reward = 24/44
-----
Pairhas retrace 50% from Asian low to European high, and is trapped in that zone in consolidation.
Notes:
* When distance of A to B is 45 pips or smaller we target the FE 161.8 extension price level. If A-B is more than 45 pips, we target the FE 100.
Tighter low of 1.2888 for Point A was also valid. That would have made the FE 161.8 = 1.2958. That would have resulted in Risk/Reward of 24/24.
As previously mentioned, the use of the FIBO FAN can catch highs and lows. In this latest case, the 78.6% fibo fan line once again caught the high as resistance – on the Daily chart. The 61.8% retrace fib also held. See recent post on this subject
Attached 5-min chart:
A = 09:20 high 1.2976
B = 09:50 low 1.2930
C = 10:00 high 1.2943
Asian Low = 1.2932
FE 100 = 1.2897
FE 127 = 1.2885
FE 161.8 = 1.2869 (target - hit)
FE 236.2 = 1.2834
Entry Sell = 10:10 open 1.2925
Stop-loss = just above Point C 1.2943 + spread/cushion = 1.2947
Risk = 22 pips
Reward = 53 pips after paying spread on exit.
-----
In case you're wondering why extension stopped at 1.2838, simply plot the next ABC:
A = 10:00 high 1.2943
B = 10:40 low 1.2888
C = 10:55 high 1.2906
FE 100 = 1.2951
FE 127 = 1.2836 (hit - close enough)
FE 161.8 = 1.2816
A = 06:15 high 1.2912
B = 06:55 low 1.2867
C = 07:25 high 1.2906
Asian Low = 1.2867 (same as Point B)
Entry Sell = 08:15 open of 5-min candle 1.2864
Stop-loss options (add 3-pip spread):
- just above FE 61.8 fib of 1.2878 = risk of 16 pips
- just above 1-min pivot 1.2884 = risk of 23 pips
- just above 1-min pivot (low) of 1.2888 = risk of 27 pips
- just above 1-min pivot 1.2899 = risk of 38 pips
FE 100 = 1.2861
FE 127 = 1.2849
FE 161.8 = 1.2833 (target – hit)
Risk = 27 pips
Reward = 27 pips (after spread and cushion)
Plotting 2nd ABC, will show that extension’s subsequent movement.
A = 07:40 high 1.2906
B = 08:20 low 1.2846
C = 09:20 high 1.2872
FE 100 = 1.2811
FE 127 = 1.2794
FE 161.8 = 1.2773 (hit)
FE 236.2 = 1.2728
Pair very bearish, apparently in anticipation of Euro Zone bank stress test results Friday. Good, anything that moves the market is welcomed.
Cheers
edit: Test: You can also plot the 3rd ABC. It's extension just hit the FE 100.
Couldn't see pivot on 5-min, thus look at 1-min chart.
1-min chart
A = 07:22 low 1.2740
B = 07:23 high 1.2794
C = 07:26 low 1.2781
Asian High 1.2814
FE 100 = 1.2835 (target)
FE 127 = 1.2850
FE 161.8 = 1.2868
Fe 236.2 = 1.2909 (hit)
Entry Buy: 5-min open of 08:05 candle 1.2818 + spread = 1.2821
Stop-loss options:
- Just below Point C 1.2781 – risk = 39 pip
- Just below 1-min pivot 07:39 low 1.2789 = risk of31 pips
- Just below 1-min pivot 07:54 low 1.2796 = risk of 25 pips
Risk = 26 pips (including 1-pip cushion)
Reward = 14 pips (to FE 100)
Point B too far from Asian High (break level)
5 –min chart 2nd ABC pull
A = 06:35 low 1.2740
B = 08:05 high 1.2824
C = 08:25 low 1.2800
FE 100 = 1.2884 (target)
FE 127 = 1.2907 (hit)
FE 161.8 = 1.2936
Entry Buy: open of 5-min candle 08:50 1.2834 + spread = 1.2837
Stop-Loss Options:
- Just below Point C 1.2800 = risk of 36 pips
- Just below Asian High 1.2814 = risk of 22 pips
Risk = 36 pips
Reward = 47 pips
-------
Comments: Since our rules for profit target deduced that the risk/reward trading to the FE 100 was not 1:1, we passed. That is, until we saw another pivot, shortly after the breach of the Asian high.
The 2nd ABC pull off the 5-min was very clear for this pivot. We used the same Point A, but adjusted for new Point B and C to incorporate the elongated swings. The 5-min chart showed the red candles while it pivoted to form a new Point C.
Heading into an anticipated volatile European session (European bank stress tests results Friday), we saw both high and low of the Asian session broken. This post will address the first, breakout of Asian high. It was fast, so let’s look at the1-min chart to see the ABC swings.
We waited for pair to pivot, after breach of Asian High. This is due to Point B being too far from Asian high, if we plotted the previous ABC. This is similar to yesterday.
A = 07:59 low 1.2880
B = 08:03 high 1.2920
C = 08:05 low 1.2906
Asian High = 1.2913
FE 100 = 1.2947
FE 127 = 1.2958 (hit)
FE 161.8 = 1.2972 (target)
Stop-loss: just below Point C + cushion = 1.2905
Entry open of 08:10 (5-min) candle priceof1.2928 + spread = 1.2931
Risk = 26 pips
Reward = 41 pips
Extension did not make it to our target of FE 161.8. We did move our stop-loss.
If you switch to the 5-min chart, we can see confirmation (close of candle) above the FE 127. That was a fast moving candle at 08:35.
Now, switch back to the 1-min chart. We can see a pivot wick just below the FE 127 at 1.2951, and we move our stop-loss just below this area, to 1.2949.
Extension made another attempt to reach the FE 161.8 but failed. We either stopped-out at 1.2949 for a +18 pip trade……..
IMPORTANT
As per previous examples, we always try to monitor the longer time-frame charts for support and resistance levels.
1-Hour chart fib retracement tool:
High = June 20th 06:00 high 1.3027
Low = June 21st 18:00 low 1.2831
78.6% fib = 1.2964 -----this is where the extension halted!!
Note: the 78.6% fib retracement level is not a default level, so you must add it. Go to the MT4 help section for instructions on how to add it to the fib retracement tool.
Trading off some data in euro session, fundamental traders also positioned themselves ahead of the 16:00 GMT bank stress test results. We saw short selling as some did not want to be caught long.
This trade ended well ahead of the 16:00 announcement.
A = 10:35 high 1.2949
B = 13:00 low 1.2872
C = 13:05 high 1.2884
Asian Low = 1.2859
FE 100 = 1.2807 (target - hit)
FE 127 = 1.2788
FE 161.8 = 1.2761
Entry Sell: Open of 13:15 (5-min) candle price of 1.2849
Stop-loss options:
- Just above Point C price of 1.2883 + spread and cushion = 1.2887 for risk of 38 pips.
- Just above point B of 1.2872 + spread and cushion = 1.2876 for risk of 27 pips
- Just above Asian Low price of 1.2859 + spread and cushion = 1.2863 for risk of 14 pips
Risk = 27 pips
Reward = 38 pips (after spread and cushion*)
* Review of basics.
Remember, we pay broker’s spread on buy for this pair. After a sell entry, we must exit with a buy. This is also referred to as “cover”. In this case, it’s a short cover, meaning we cover our short position.
Your MT4 trading platform will have bid and ask prices. You must be aware of which one is valid vis-à-vis you trade direction.
Pertaining to this trade, your MT4 platform, as extension hit our profit target of 1.2807, would show an “ask” price of 1.2810. Therefore, we must pre-set our “take profit” on the MT4 platform for this price. You may also want to add a 1 or 2-pip cushion too. That would take it to 1.2811 or 1.2812.
The attached EUR/USD 1-Hour chart reviews fib pulls that assisted us for support and resistance.
Fibo Fan Pointing Up:
Low = July 13th 07:00 low 1.2522
High = July 23rd 08:00 high 1.2965
Fibo Fan Pointing Down:
High = July 20th 06:00 high 1.3027
Low = July 21st 18:00 low 1.2731
Retracement Fibs:
High = July 20th 06:00 high 1.3027
Low = July 21st 18:00 low 1.2731
We can move high or low for fibo fans, as new peaks and valleys develop.
The retracement fibs provided support & resistance for both of the July 23rd breakouts’ max price levels. The 78.6% for the high area of 1.2964. The 23.6% for low area of 1.2801
Note: The colored boxes on chart denote the three sessions. Gray = U.S., Yellow = Asian, Blue = European. The indicator Time_Modified2 is used. There is, however, a flaw in that the 1-Hour chart can be off during the first hour of a session and not paint the true high/low. Always check.
Have a good weekend....cheers!
Hi Fxbaja
You are a warrior indeed. I enjoyed the illustrations tremendously. Please where can I get the FIBO FAN you used in your charts? Thanks
The Fibo (Fibonacci) Fan is a tool that comes with the MT4 trading platform. If you don't trade with that platform, you can always just get a MT4 demo account and plot your various fibs, etc.
Find a source for the MT4 demo that doesn't have a 30-day limit.